Replies to post #94269 on Biotech Values

[DewDiligence]

IDIX: Let me answer your question on “exit strategy” by revisiting a post I made just prior to the JP Morgan conference. From #msg-45252157 on Jan 7, 2010:

Having scooped up a boatload of shares below $2 (#msg-43797730, #msg-43392969), I’ll be enjoying the ride if there is one… With 71M diluted shares for valuation purposes (#msg-40353178) and an estimated $50M net cash as of today (#msg-43361797), IDIX’s enterprise value at today’s closing price is only 2.33x71-50 = $115M. This strikes me as ridiculously cheap when you consider that IDIX is a bona fide drug-discovery company whose HCV portfolio includes all of the major antiviral drug classes. In other words, it would not take much in the way of news to spur a substantially higher valuation, IMO.

Well, the share price is now $4.41, IDIX’s net cash is roughly $36M (#msg-45351175), and the number of diluted shares for valuation purposes is unchanged at 71M. Thus, IDIX’s enterprise value at today’s closing price is 4.41x71-36 = $277M. While not the screaming buy that it was when the EV was only $115M (above), an EV of $277M still strikes me as unduly cheap for a company that has as much going for it as IDIX does (see #msg-49004017).

The one fly in the ointment, of course, is liquidity. If IDIX does not ink a partnership deal for IDX184 fairly soon, it will have to raise capital. Since a quick partnership deal may be too much to expect (see dewophile’s post in #msg-48546028), I’m prepared for a financing transaction and I’m willing to hold my shares anyhow. In my opinion, the bigger risk is being out of the stock when the next positive development occurs.